Measures taken by governments worldwide against the coronavirus pandemic, such as health expenditure, tax, and spending supports for people and firms, will have $3.3 trillion of fiscal cost directly, the International Monetary Fund (IMF) stated.
The coronavirus and its economic results will cause a major increase in fiscal deficits and public debt ratios compared with previous expectations, the IMF said in its report titled Fiscal Monitor 2020, which was released on Wednesday.
“In addition, although public sector loans and equity injections ($1.8 trillion) and guarantees and other contingent liabilities ($2.7 trillion) can support financial and non-financial enterprises, they also create fiscal risks,” it added.
The IMF underlined that the global outbreak has elevated the requirement for fiscal policy action to an “unprecedented level”.
The Fund warned the virus’s human cost has deepened and it is likely to affect public finance massively.
“Government responses should be swift, concerted, and commensurate with the severity of the health crisis, with fiscal tools taking a prime role,” IMF added.
“The first priority, saving lives, requires fully accommodating spending on testing and treatment, which calls for global coordination — including support to countries with limited health capacity, through grants and concessional financing and the development of a universally low-cost vaccine.” the Fund added in its report.
Companies should be supported with liquidity to protect them against bankruptcy, it added.
The Fund also said revenues will drop even more sharply as output declines.
“Revenue is projected to be 2.5 percent of global GDP lower in the baseline scenario for 2020 than what was projected in the October 2019 Fiscal Monitor.”
Fiscal balances will deteriorate in almost all countries in 2020 while the sizable expansions are expected in economies of the U.S., China, besides several European and Asian economies, it added.
IMF also noted that the pandemic’s impact would be deeper on emerging markets and developing economies, which should “reprioritize expenditure toward the health sector while safeguarding key public services (transport, energy, communications) and social protection,”
The coronavirus has spread to 185 countries, with more than 2 million people infected so far, according to the U.S. based Johns Hopkins University.
